I congratulate my hon. Friend Mrs. Cryer on securing this Adjournment debate. Through the early-day motion and extensive lobbying, she has shown a great interest in the impact of FSCS levies on building societies, and we have previously discussed the matter. I hope to use this opportunity to go into greater detail on the current position.

It is important to set the matter in context. I do not think that I need to say that we are living through extremely uncertain times and that the banking crisis has made the past 18 months challenging for the industry, the Government and the general public. Now is not the time to debate the causes of the crisis or to decide who is to blame. Suffice it to say that the Government took action when they needed to in relation to Northern Rock, Bradford & Bingley and the Icelandic banks. As my hon. Friend noted, no retail depositor in British banks has lost out in the wake of the global financial crisis. I emphasise that the Government remain committed to doing whatever it takes to stabilise the banking system to protect depositors and taxpayers and to support the wider economy.

As hon. Members will be aware, we brought into force the Banking (Special Provisions) Act 2008 to give us the right mix of emergency powers to deal with deposit takers in difficulty. That Act's successor, the Banking Act 2009, reformed those powers and put them on permanent footing. It made some changes to the legal framework for the FSCS and introduced a new bank insolvency procedure, which aims to allow speedier payouts to eligible depositors. We hope never to have to use those powers, but we are now in a position to deal swiftly and precisely, if necessary, with financial institutions that pose a threat to financial stability in the UK.

We have used the powers under the 2008 Act to protect the financial system by, as Mr. Hoban noted, transferring deposits from Bradford & Bingley, Heritable and Kaupthing Singer and Friedlander. We have also ensured that retail depositors in UK branches of Landsbanki and London Scottish have been fully compensated. All that costs money. The Government contributed by paying for the transfer of deposits or compensation when depositors stood to lose more than £50,000. We expect the Icelandic Government to support deposits in branches of Icelandic banks.

That leaves a cost, which falls on the UK FSCS. As my hon. Friend the Member for Keighley clearly outlined, the principle behind the scheme is that the industry mutually meets the costs of compensating retail customers for losses caused by the failure of their peers, be they deposit takers, insurers, or other firms. I did not hear any hon. Member who spoke today argue with the general principle that the industry should meet its own costs of failure.

Under normal rules, a large part of the cost of compensating depositors could have fallen immediately on FSCS levy-paying firms. That would have left deposit takers facing a £1.8 billion bill and other firms a £2.2 billion bill. The Government recognised that that would be a serious burden for many firms and that the FSCS would still need large loans to meet costs over the first £4 billion. Accordingly, we arranged for the Bank of England to make loans. The loans are being refinanced by the Treasury, but they will have to be paid for. The interest costs on the borrowing will be met by deposit-taking firms, and the loans will be repaid over time by FSCS levy-payers after recoveries have been made from the assets of those banks that were the subjects of pay-outs.

As my hon. Friend explained, the deposit-taker category of firms includes banks, building societies and credit unions, which brings us to the nub of today's debate—that building societies believe that it is unfair that they must contribute to the cost of failed banks. I understand that, and I have every sympathy with societies who find themselves in that position.

Annotations

I congratulate Ian Pearson for his ability to continue misleading Parliament while thousands of British people suffer due to the actions of the UK Treasury and Government.

On 6th November 2008 Mr Pearson said that their was no reason British people could not hold onshore UK accounts. This was untrue and misleading as the Government for whom he aligns himself brought out legislation in 2007 that resulted in Banks no longer accepting custom of outside the shores of mainland UK - thus forcing non-domiciled Brits to bank in dodgy dishonest off-shore money laundering havens such as the Isle of Man. The actions of the Gordon Brown lead Uk Government no more protected the UK financial system than it destroyed the lives of British families.

Now Mr Pearson attempts to mislead Parliament even more by trying the old chestnut of saying the Icelandic Government should pay back the thousands of British people now in desperate (Three have taken their lives so far, to my knowledge - in New York, Brisbane and the UK) situations.

The UK Government are to blame for the suffering two fold; By enacting legislation that forced UK Citizens to use offshore banks. And by using legislation (brought in 4 hours AFTER is was used) to take away the money of teh very citizens it forced offshore in the first place.

And now we hear that the Kaupthing liquidators - following rules dictated by the Government - have paid Labour friends Dave Whelan and Stockcube Plc their money back 100%. All this, while thousands of British Citizens - forced to use offshore banks by defective 2007 money laudering legislation - have been thrown into destitution by the Brown Government.

This Government is not protecting British Citizens from the affects of a global downturn but taking their money away (to give to its rich chums) and throwing them headlong into the thick of it. And the opposition parties are letting them. This is UK Parliament of shame.

My husband was killed by a drunk driver a year ago and i received £200,000 in life insurance. I decided to move back to New Zealand, where my family lived but wanted to leave my husbands money in the UK. I couldn't keep my UK bank account as the bank said that it was against its rules to allow an account to be held without a UK address. The bank was helpful and suggested i opened an Isle of Man bank account.

I opened an account with Kaupthing Singer and Freidlander on the isle of man and paid the money in there. Then i heard it had collapsed. I didnt beleive it at first as i had made sure the bank had a high rating with the credit agencies.

To find out the bank collapsed because of the actions of the british government is just terrible. How can the british government do this and then just deny it and not do anything? It is disgusting the way they have ignored the dreadful stories many people have told since they caused the collapse and i hope bad things happen to them. It is a horrible thing to say but these politicians are horrible people.